The Weekend Quiz – June 23-24, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
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    The Weekend Quiz – June 23-24, 2018

    Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
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      Posted in Saturday quiz | 2 Comments

      Real resource constraints and fiscal policy design

      There is an interesting dilemma currently emerging in Australia, which provides an excellent case study on how governments can use fiscal policy effectively and the problems that are likely to arise in that application. At present, the Australian states are engaging in an infrastructure building boom with several large (mostly public sector) projects underway involving improvements to road, ports, water supply, railways, airports and more. I travel a lot and in each of the major cities you see major areas sectioned off as tunnels are being dug and buildings erected. Not all of the projects are desirable (for example, the West Connex freeway project in Sydney has trampled on peoples’ rights) and several prioritise the motor car over public transport. But many of the projects will deliver much better public transport options in the future. On a national accounts level, these projects have helped GDP growth continue as household consumption has moderated and private investment has been consistently weak to negative. But, and this is the point, there have been sporadic reports recounting how Australia is running out of cement, hard rock and concrete and other building materials, which is pushing up costs. This is the real resource constraint that Modern Monetary Theory (MMT) emphasises as the limits to government spending, rather than any concocted financial constraints. If there are indeed shortages of real resources that are essential to infrastructure development then that places a limit on how fast governments can build these public goods. The other point is that as these shortages are emerging, there is still over 15 per cent of our available labour resources that are being unused in one way or another – 714,600 are unemployed, 1,123.9 thousand are underemployed, and participation rates are down so hidden unemployment has risen. So that indicates there is a need for higher deficits while the infrastructure bottlenecks suggest spending constraints are emerging. That is the challenge. Come in policies like the Job Guarantee.
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        Posted in Debriefing 101, Fiscal Statements, Job Guarantee, Labour costs, Labour Force | 33 Comments

        Do not privatise the Australian Broadcasting Commission

        It is Wednesday and my blog-light day. I am travelling a lot today and so have little time anyway for blog activities. Today, though, I reflect on the current demand by the conservatives in Australia to privatise our national broadcaster. This is a brazen attempt by mindless people, who are scared of knowing about the world beyond their own prejudices and sense of entitlement, to shut down a broadcaster they perceive to be an ideological threat. The amusing aspect is that this lot are too stupid to realise that the ABC is not left-leaning anyway. It increasingly runs news and economic commentary that is neoliberal to the core! But it remains that a public broadcaster has an essential role to play in a media landscape where profit rules content. The ABC has a long tradition of providing quality programs and analysis and while it has gone off the rails in recent years with its economic analysis (bowing to the neoliberal norm) it still provides excellent material to the public without advertisements that the commercial broadcasters have (and would never) provide. I also have some nice music offerings today.
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          Posted in Economics, Music | 9 Comments

          The ‘truth sandwich’ and the impacts of neoliberalism

          On June 15, 2018, the OECD released their report – A Broken Social Elevator? How to Promote Social Mobility – which provided “new evidence on social mobility in the context of increased inequalities of income and opportunities in OECD and selected emerging economies”. If you are still wondering why the mainstream progressive political parties have lost ground in recent years, or why the Italian political landscape has shifted from a struggle between ‘progressive’ and conservative to one between anti-establishment and establishment (the latter including both the traditional progressive and conservative forces which are now virtually indistinguishable) then this evidence will help. It shows categorically that neoliberalism has failed to deliver prosperity for all. While the full employment era unambiguously created a dynamic environment where upward social mobility and declining inequalities in income, wealth, opportunity were the norm, the more recent neoliberal era has deliberately stifled those processes. It is no longer true that ‘all boats rise on a high tide’. The point is that this is a situation that our governments have allowed to arise and which they can alter if they so choose. We should be forcing them to restore the processes that deliver upward mobility. And that is where the “truth sandwich” comes in. Progressive politicians that bang on about ‘taxing the rich to deliver services to the poor’ or who ask ‘where is the money going to come from’ or who claim the ‘bond markets will rebel’ and all the rest of the neoliberal lying drivel should familiarise themselves with the way the sandwich works. It is a very tasty treat if you assemble it properly.
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            Posted in Debriefing 101, Framing and Language, Friends like this, Labour Force, Reclaim the State | 13 Comments

            European-wide unemployment insurance proposals – more bunk!

            The Europhiles have been tweeting their heads off in the last week or so thinking that the corner has been turned – by which they mean that Germany is about to get all cuddly with France and agree to fundamental shifts in thinking which will make the dysfunctional Economic and Monetary Union (EMU) finally workable, without the need for the ECB to break Treaty law by propping up the private bond markets. The most recent incarnation of the ‘saviour’ is a few words that the new German Finance Minister, Olaf ‘Wolfgang Schäuble’” Scholz said during an interview with Der Spiegel (June 8, 2018) – ‘Germany Has a Special Responsibility’ – about his support for a new unemployment insurance scheme for the Eurozone. It seems even the smallest things excite those who remain in denial about the long-term viability of the common currency. The proposal that Scholz was advancing has been out in the public debate for some years and is nothing like an effective solution to the terminal design flaws in the EMU. It is just an application of the same thinking that led to the creation of that flawed architecture in the first place and reinforces the conclusion that the main players in Eurozone policy setting have no intention of creating an effective federated monetary system. Just more of the same. Tomorrow, the tweets will be extolling the virtues of some other erroneous plan that some Europhile has come up with to save the system. And so it goes.
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              Posted in Eurozone, Reclaim the State | 13 Comments

              The Weekend Quiz – June 16-17, 2018 – answers and discussion

              Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
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                Posted in Saturday quiz | 8 Comments

                The Weekend Quiz – June 16-17, 2018

                Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blogs I post. See how you go with the following questions. Your results are only known to you and no records are retained.
                Read the rest of this entry »

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                  Posted in Saturday quiz | 4 Comments

                  Australian labour market – weaker in May with tepid employment growth

                  The Australian Bureau of Statistics released the latest – Labour Force, Australia, May 2018 – today which showed that the Australian labour market weakened further over the last month. Overall employment growth was tepid and was marked by a significant decline in full-time employment and a sharp fall in monthly hours worked. In addition, the participation rate fell by 0.2 points (rounded), which is the only reason total unemployment and the unemployment rate declined. Had the participation rate not declined, then the weak employment growth would have caused a rise in overall unemployment. The teenage labour market was the only bright spot. Further, underemployment rose by 19.2 thousand in the three months to May 2018 and the broad labour underutilisation rate remains high at 13.9 per cent. Overall, my assessment is that the Australian labour market remains stuck in a weak state and is still a considerable distance from full employment. There is a lot of slack remaining and defies the foolish calls in recent months from those demanding reductions in the fiscal deficit.
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                    Posted in Labour Force | 1 Comment

                    German press and its politicians lose the plot – Europhiles be warned

                    I am reverting back this Wednesday to a shorter blog post to free up a bit more time to advance other writing projects. Here are some snippets on Germany and Italy that caught my eye this week. And a link to an essential video about Venezuela. And some music in a sad week (musically).
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                      Posted in Eurozone, Music | 20 Comments